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BA Raises Dividend, Resumes Buyback

The Boeing Company (BA) raised its quarterly dividend by 10% to 48.5 cents per share from the previous payout of 44 cents per share. The dividend is payable on March 8, 2013, to shareholders of record as of February 15, 2013. The hike raised Boeing’s annualized dividend per share to $1.94 versus the pre-existing $1.76.

Boeing also announced the resumption of its stock repurchase program with repurchases expected to total between $1.5 billion and $2.0 billion in 2013. The company plans to begin repurchasing shares in the open market following its fourth-quarter earnings announcement in late January 2013. The repurchase program is expected to use the remaining $3.6 billion previously authorized by the Boeing board of directors in October 2007.

Boeing’s strong balance sheet and cash flows provide financial flexibility in matters of incremental dividend, share repurchases and earnings accretive acquisitions. The company had a strong balance sheet with a stable long-term debt-to-capitalization of 62.1% at the end of the first nine months of 2012. Boeing’s diversified revenue stream provides a strong earnings stream leading to strong cash flows. The company generated approximately $3.3 billion of cash flows from operating activities in the first nine months of 2012. The company ended the first nine months of 2012 with cash and cash equivalents of $6.6 billion and short-term investments of $4.6 billion. Long-term debt decreased to $9.0 billion at the end of the first nine months of 2012 from $10.0 billion at the end of fiscal 2011.

Boeing enjoys a unique position as the largest aircraft manufacturer in the world in terms of revenues, orders and deliveries, and is also one of the largest aerospace and defense contractors. Besides, its revenues are spread across more than 90 countries around the globe.

Boeing taking into account its performance in the first nine months of 2012, raised its full year 2012 earnings per share guidance to a range of $4.80–$4.95 from its earlier range of $4.40–$4.60. The company also raised its revenue guidance for 2012 to the range of $80.5 billion to $82 billion versus the earlier range of $79.5 billion to $81.5 billion.

The company expects its Commercial Airplanes' 2012 deliveries to come between 585 and 600 airplanes, which are already sold out. This includes an expected 70 to 85 787 and 747-8 deliveries. Commercial Airplanes' 2012 revenue is expected to be between $47.5 billion and $49.5 billion with operating margin around 9.0%.

In the defense space, the company expects defense revenue for 2012 to be between $32.5 billion and $33.0 billion versus its earlier range of $31.5 billion and $32.0 billion with operating margin greater than 9%. Boeing Capital Corporation expects that its aircraft finance portfolio will continue to decline in 2012.

Boeing currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we are maintaining our Neutral recommendation on the stock. This is in sync with other aerospace and defense behemoths, General Dynamics Corporation (GD) and Lockheed Martin Corporation (LMT).